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The Rise and Fall of Napster
With one single program written in 1999, an 18-year old Northeastern University computer science student named Shawn Fanning would unwittingly forever transform how people use the internet. The name of his program was Napster. Dubbed after his teenage nickname because of his nappy hair, Napster was a free downloadable program that could transform individual computers into servers that shared MP3 music files across the internet. Rather than a central server where all music files were stored, Napster instead worked as a medium. Users could log in to Napster, search for an artist or song title, and then proceed to download directly from another logged-in user’s hard drive. In a little more than a year after its initial launch, Napster soon became one of the most notorious and wildly popular sites in internet history. At its peak, Napster was touting a grand total of some 60 million users worldwide (Collins, 2002). Little did Fanning realize that his brainchild would soon become as ubiquitous on the internet as email and instant messaging. Nor little did Fanning realize the ensuing legal tempest that his creation would eventually create. Ultimately what began as a simple program written for his friends to share music soon caught the attention of not only young people worldwide, but also the ire of the recording industry.
The story of Napster begins just south of Boston in the city of Brockton, Massachusetts. A 17-year old Colleen Fanning was a high school senior there in 1980. One night, her older brother threw a party celebrating his high school graduation and hired a local band called “MacBeth” to play at the party. It was a resounding success, with some 3,000 people mobbing the house. Colleen’s younger brother John went around with a hat raising money to pay for the band and netting a couple of grand by the end of the night, his first entrepreneurial experience. That same night, say the Fannings, Colleen hooked up with one of the musicians and wound up pregnant. With her dad’s support, Colleen kept her baby, and named him Shawn. However, Shawn’s biological father who happened to be the son of one of the richest families in Massachusetts bailed out. Colleen eventually ended up marrying an ex-Marine who drove a delivery truck for a local bakery. His name was Raymond Verrier. The couple had four more kids, and Colleen took care of them all while her husband worked. “Money was always a pretty big issue,” Shawn said in a 2000 Business Week article. He added, “There was a lot of tension around that” (Ante, 2000).
Shawn grew up near the public housing projects in Brockton. At the time, Verrier could see her already-shy son was withdrawing from the inner-city chaos constantly surrounding him, “He went inside himself real deep and said, ‘I want to get out of this.’ Even though it meant losing him a little bit, it’s what I wanted for him,” said Verrier, employed then as a nurse’s aide. As Shawn grew older, Verrier turned to her business-minded brother, John, to help guide her son. As an incentive to learn, for each “A” he brought home from school his uncle John Fanning gave him money. He also bought his nephew an Apple Macintosh computer that Verrier could never have had the money for (Menn, 2003). Life for Shawn at the Fanning household however was steadily worsening. The relationship between his parents finally culminated when his mother and stepfather had a split. For a year Shawn and his siblings were forced to live in a foster home (Ante, 2000). Nevertheless, Shawn’s entrepreneurial uncle John Fanning was always there to offer support to his young nephew. Shawn worked summers as an intern in the Chess.net division at his uncle John’s internet company, NetGames, in the nearby town of Hull. There, Shawn became quite deft at programming from fellow interns who were studying computer science at Carnegie Mellon University. Yet in spite of John taking a vested interest in his nephew, Shawn was reluctant to absorb his uncle’s attentive work ethic. Shawn had difficulty completing assignments and instead would often focus on playing video games. “I was just getting into programming, so I spent a lot of my time just fiddling with projects and hanging out,” Shawn said (Ante, 2000). It was also during this time however that Shawn learned about what would soon make him notorious, MP3 digital music files (Menn, 2003).
Soon upon graduating from Harwich High School in 1998, Shawn enrolled at nearby Northeastern University. What would eventually become Napster was created in the freshman dorm room of Fanning’s roommate at Northeastern University. After listening to the complaints of his roommate finding nothing but dead links for MP3 music files with conventional search engines like Lycos and Yahoo!, Shawn looked for an easier alternative. His idea was simple. He wanted to combine the conventional ease of use of the internet with file transferring technology similar to the Internet Relay Chat (IRC) network. Shawn knew that there should be a way to combine the breadth of search engines like Google with the “presence awareness” of systems like instant messaging, which know who is signed on at any given time (Menn, 2003). This was combined with having the option of individual users choose what files could be shared with others while connected to the Napster network. These innovative elements of the Napster program and network finally eliminated the problems associated with dead links. Additionally, by having all users store their music on their own computers, the electronic pipes would not clog if the new system just connected a pair of people and then dropped its own connection to them (Menn, 2003). Finally, added to these elements was a feature that enabled online Napster users to chat amongst each other in real-time.
Shawn dropped out of Northeastern in January 1999 in order to devote his full time to perfect his invention. According to Chess.net former colleague Tarek Loubani, he has seldom seen anyone so focused. “I don’t think people can appreciate how hard he worked,” said Loubani (Menn, 2003). He remembers only vaguely that stage in mid-1999, unable to recall exact months, weeks or days. Among the only memories he has of that time is being hunched over his Dell notebook computer, writing the code and snoozing on his uncle John’s couch or floor. Afraid of having a software company introduce a similar product before him, he obsessively wrote the entire source code of Napster in 60 straight hours (Greenfeld, 2000). In May 1999, Shawn’s uncle John incorporated the company as Napster. John Fanning would retain a 70% stake in the corporation while nephew Shawn would only retain 30% stake in the corporation. The justification offered by uncle John was that Shawn desperately needed a seasoned businessman like him to handle the nuances of running the company. (Menn, 2003).
Word quickly spread around the Northeastern University campus as soon as their former classmate Shawn had a preliminary beta program of Napster ready for testing on June 1, 1999. Soon, hundreds of college students were busy trading music. This new revolutionary file sharing service quickly became the buzz among the internet literati frequenting bulletin boards and chat rooms. The Napster network was growing and it was growing at a speedy pace. Faced with the prospect of unprecedented popularity within such a short period of time, the Fannings set out to raise capital for additional bandwidth and servers. The company relocated from Hull, Massachusetts to San Mateo, California to a more spacious location and hired additional workers. The additional capital investment in Napster came just in time. Napster became so popular that some college campuses were experiencing clogged up servers from the amount students using Napster alone. Schools such as the Pennsylvania State University in 1999 issued a moratorium on the use of Napster on campus computers and internet connections in an attempt to alleviate the problem. Napster’s woes were only beginning.
The notoriety eventually caught the attention of the Recording Industry Association of America (RIAA). The RIAA filed a lawsuit against Napster on December 7, 1999, alleging copyright infringement. Furthermore, the RIAA wanted compensation of $10,000 for every single copyrighted song traded across the Napster network. The unprecedented lawsuit garnered much media attention and further propelled Napster’s popularity, in particular with college students. Escalating droves of young people flocked to Napster to swap music, and the community soon touted millions of members worldwide. At any given time during this period, there would be millions of users online, trading hundreds of thousands of songs.
Later during spring of 2000, the heavy metal band Metallica learned that an unreleased studio outtake of their song “I Disappear” had been leaked and was being traded on Napster. The result was that the single was heard on numerous radio stations across America. Metallica was determined to find out how the song became so widely disseminated. The obvious culprit was Napster. A copyright infringement lawsuit was filed on April 13, 2000. After hiring consulting firm PDNet, Metallica soon discovered that during one weekend in April 2000, over 335,000 individual Napster users were trading their music online. On May 3, 2000 Napster was presented with 60,000 pages of user names that had allegedly traded copyrighted Metallica songs over the Napster network. Metallica demanded that Napster ban the 335,000 users for trading their copyrighted material, and Napster acquiesced. Napster attorney Laurence Pulgram stated, “Napster has taken extraordinary steps to comply with Metallica’s demands to block hundreds of thousands of its fans from using the Napster system.” He further added, “Napster has always stated that it would act in response to notice from copyright holders, and it has lived up to that commitment in good faith.” (Dansby & Uhelszki, 2000).
On May 5, 2000, Napster received a fatal legal blow. U.S. District Court Judge Marilyn Hall Patel ruled that Napster was not entitled to “safe harbor” status under the 1992 Digital Millennium Copyright Act. Napster’s original defense in its RIAA suit was that it was included under section 1008. This section in the Act explicitly stated that:
“No action may be brought under this title alleging infringement of copyright  based on the manufacture, importation, or distribution of a digital audio recording device, a digital audio recording medium, an analog recording device, or an analog recording medium, or  based on the noncommercial use by a consumer of such a device or medium for making digital musical recordings or analog musical recordings.”
The Court found that Napster’s users were engaged in widespread copyright violation. Furthermore, the ruling also stated that Napster is “contributorily and vicariously liable for their actions.” The exclusion under Section 1008 of the AHRA was inapplicable here, because the Act provides immunity only from noncommercial copying and not public distribution. The Napster network was composed of over 20 million people. Therefore, each time a user was logged onto the network and shared his or her hard drive contents, that user was distributing copyrighted material to the masses. Section 1008 of the AHRA deals with the reproduction and not the distribution of copyrighted material. Therefore According to the court, Napster users were in violation of copyright infringement and the Napster was facilitating copyright infringement. Judge Patel granted the RIAA request for a preliminary injunction and the site was ordered shut down on July 26, 2000.
In the interim, Napster appealed the judgment on October 2, 2000. The Napster appeal was lost on February 12, 2001. A bid of $1 billion from Napster to settle out of court with the recording industry was shortly rejected. On March 5, 2001, the Ninth Circuit Court ordered Napster to stop the trading of copyrighted material on its network. As a result, Napster began to use filters in its search engine. The Napster system completely blocked any artist or song title that was copyrighted from user searches. Popular artists and song titles were no longer showing up in search results. As a consequence, clever users of Napster circumvented the filters by intentionally misspelling the artist or song title on their hard drives. Napster users could still be able to download copyrighted music. As a consequence, Napster completely shut down its whole network in July 2001 to fully abide by the court injunction. On September 24, 2001, Napster settled with copyright holders to the tune of $26 million for the illegal use of music, and $10 million up front to cover impending royalty agreements. Napster announced on May 17, 2002 an agreement with Germany’s Bertelsmann AG. The agreement would allow a subscriber-based form of Napster to develop featuring the Bertelsmann AG music catalog, in exchange for the German company to drop its lawsuit against Napster. However on June 3, 2001 Napster filed for bankruptcy under Chapter 11. The sale to Bertelsmann AG was blocked, and Napster was forced to divest its remaining assets.
The current legal incarnation of Napster is as a subscriber-based pay service. Roxio purchased the Napster assets at auction in 2002. According to Wikipedia (2005) a monthly charge of $9.95 is billed to members that can provisionally rent songs, with the option of paying an extra $0.80 to $0.90 to permanently download songs. While the new Napster has only a fraction of the old Napster’s popularity, others have filled the void in the peer-to-peer file-sharing world. Popular services like Kazaa, Limewire and Morpheus utilize the technology made infamous by Shawn Fanning. Yet where the original Napster had a central server, these services rely on connecting directly to other network users. They are inherently more difficult to regulate for copyright infringement and likewise nearly impossible to stop.
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